Question 1

Identify which of the following statements is false.

Accepted Answer

A) A power of appointment exists when a person transfers property and grants someone else the power to specify who eventually will receive the property. 
B) A person possesses a general power of appointment if the person has the power to appoint property to himself,his creditors,his estate,or the creditors of his estate. 
C) The donee's payment of the gift tax does not reduce the amount of the gift because it is treated as consideration paid to the donor. 
D) The donor must recognize as a gain the excess of the gift tax payable over the adjusted basis of the property. 
A) A power of appointment exists when a person transfers property and grants someone else the power to specify who eventually will receive the property. 
B) A person possesses a general power of appointment if the person has the power to appoint property to himself,his creditors,his estate,or the creditors of his estate. 
C) The donee's payment of the gift tax does not reduce the amount of the gift because it is treated as consideration paid to the donor. 
D) The donor must recognize as a gain the excess of the gift tax payable over the adjusted basis of the property.

Question 2

Jason funds an irrevocable trust with Liberty Bank as trustee and reserves the right to receive the income for seven years.He provides that at the end of the seventh year,the trust assets will pass outright to his adult daughter,Paula,or to Paula's estate should Paula not be alive.Jason transfers assets valued at $1.5 million to the trust; the assets at present are producing income of about 7.5% per year.Assume that the Sec.7520 rate per the actuarial tables for the month of the transfer is 10%.What tax issues should Jason consider regarding the trust?

Accepted Answer

• Do the estate freeze rules apply to th

Question 3

Identify which of the following statements is true.

Accepted Answer

A) When making a QTIP transfer,the donor does not control who will receive the property on the death of the donee-spouse. 
B) The marital deduction is limited to the amount of the gift that exceeds the annual exclusion. 
C) Claiming the marital deduction on a QTIP transfer is mandatory. 
D) Terminal interests cannot be eligible for the marital deduction. 
A) When making a QTIP transfer,the donor does not control who will receive the property on the death of the donee-spouse. 
B) The marital deduction is limited to the amount of the gift that exceeds the annual exclusion. 
C) Claiming the marital deduction on a QTIP transfer is mandatory. 
D) Terminal interests cannot be eligible for the marital deduction.

Question 4

Marilyn and Earl establish a trust benefiting their grandchild,Courtney,age 4.Courtney is to receive the accumulated income and corpus when she reaches age 30.In the year of the transfer,Courtney has a two-week period in which to request distributions.This trust is a

Accepted Answer

A) 2503(c)trust. 
B) Clifford trust. 
C) Crummey trust. 
D) none of the above 
A) 2503(c)trust. 
B) Clifford trust. 
C) Crummey trust. 
D) none of the above

Question 5

Bryce pays $10,000 for his adult grandson's tuition at medical school and $8,000 for the grandson's room and board in the medical school's dormitory.All payments are made directly to the medical school.Do these payments by Bryce qualify as gifts?

Accepted Answer

Section 2503(e)exempts the pay

Question 6

Identify which of the following statements is true.

Accepted Answer

A) The trustee of a Sec.2503(c)trust must distribute all of the corpus and accumulated income when the beneficiary reaches the age of 25. 
B) The gift tax exclusion is available for a gift of a present or future interest. 
C) A "Crummey demand power" in a trust document allows the donor to demand a distribution from the trust in years in which assets are transferred to the trust. 
D) All of the above are true. 
A) The trustee of a Sec.2503(c)trust must distribute all of the corpus and accumulated income when the beneficiary reaches the age of 25. 
B) The gift tax exclusion is available for a gift of a present or future interest. 
C) A "Crummey demand power" in a trust document allows the donor to demand a distribution from the trust in years in which assets are transferred to the trust. 
D) All of the above are true.

Question 7

A qualified disclaimer must be made within nine months after (a)the day the property is transferred,or (b)the day the person receiving the property becomes age 21,whichever is later.

Accepted Answer

A) True 
 B)False

Question 8

Gift tax returns are filed on a calendar-year basis.

Accepted Answer

A) True 
 B)False

Question 9

Discuss the negative aspects of gifts.

Accepted Answer

The donor loses complete control of the

Question 10

A net gift occurs when a donor makes a gift subject to the agreement that the recipient agrees to pay the gift tax.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following transfers is subject to the gift tax?

Accepted Answer

A) Matilda contributes $5,000 to a Senate candidate's political organization. 
B) Frank gives $30,000 to a lobbying group promoting stricter environmental regulations. 
C) Julia establishes a trust benefiting her nieces and nephews.Julia will determine the amount of any distributions made. 
D) Lance purchases land,titling it in the names of Lance and Sheryl,joint owners. 
A) Matilda contributes $5,000 to a Senate candidate's political organization. 
B) Frank gives $30,000 to a lobbying group promoting stricter environmental regulations. 
C) Julia establishes a trust benefiting her nieces and nephews.Julia will determine the amount of any distributions made. 
D) Lance purchases land,titling it in the names of Lance and Sheryl,joint owners.

Question 12

Gloria makes the following gifts during the year: $15,000 cash to her son,Andy
Stock with a basis of $10,000 and a $30,000 fair market value to her sister,Helen
$100,000 to a revocable trust benefiting her nephew,George
Land with a basis of $60,000 and a fair market value of $50,000 to the American Cancer Society
Before considering the unified credit,what are Gloria's taxable gifts?

Accepted Answer

A) $17,000 
B) $45,000 
C) $95,000 
D) $121,000 
A) $17,000 
B) $45,000 
C) $95,000 
D) $121,000

Question 13

Tracy gave stock with an adjusted basis of $18,000 and an FMV of $15,000 to her nephew Phil.No gift tax was paid.Phil sold the stock for $16,000.The gain or loss Phil will recognize on the sale is

Accepted Answer

A) $1,000 gain. 
B) $0. 
C) $1,500 loss. 
D) none of the above 
A) $1,000 gain. 
B) $0. 
C) $1,500 loss. 
D) none of the above

Question 14

Which of the following statements is true?

Accepted Answer

A) If the donor does not pay the gift tax,the donee is personally liable for the tax. 
B) When a married couple elects gift splitting,each spouse is potentially liable for 50% of the gift tax. 
C) Gift tax returns are due March 15 in the year following the gift. 
D) Donors can request an automatic extension of time to pay their gift tax even when they don't request to have an income tax extension. 
A) If the donor does not pay the gift tax,the donee is personally liable for the tax. 
B) When a married couple elects gift splitting,each spouse is potentially liable for 50% of the gift tax. 
C) Gift tax returns are due March 15 in the year following the gift. 
D) Donors can request an automatic extension of time to pay their gift tax even when they don't request to have an income tax extension.

Question 15

Identify which of the following statements is false.

Accepted Answer

A) If an individual transfers property in trust and reserves the right to the trust's income for life,the individual retains a life estate. 
B) An individual who receives a remainder interest will receive property after the death of the holder of a life estate. 
C) If a grantor transfers property in trust and names a beneficiary to receive only a term-certain interest and then the property is to return to the grantor,the transaction is not subject to gift tax. 
D) Life estates are valued using actuarial tables. 
A) If an individual transfers property in trust and reserves the right to the trust's income for life,the individual retains a life estate. 
B) An individual who receives a remainder interest will receive property after the death of the holder of a life estate. 
C) If a grantor transfers property in trust and names a beneficiary to receive only a term-certain interest and then the property is to return to the grantor,the transaction is not subject to gift tax. 
D) Life estates are valued using actuarial tables.

Question 16

Discuss the statutory exemptions from the gift tax.

Accepted Answer

Payments of medical expenses and college

Question 17

Identify which of the following statements is false.

Accepted Answer

A) The gift-splitting election will apply to all transfers made during the portion of any year that the spouses electing gift splitting are married to each other. 
B) The gift-splitting election is made separately on each gift either spouse makes. 
C) Making gifts during one's lifetime helps to reduce the amount of estate taxes owed at death. 
D) In order to use gift splitting,both spouses must be U.S.citizens or residents at the time of the transfer. 
A) The gift-splitting election will apply to all transfers made during the portion of any year that the spouses electing gift splitting are married to each other. 
B) The gift-splitting election is made separately on each gift either spouse makes. 
C) Making gifts during one's lifetime helps to reduce the amount of estate taxes owed at death. 
D) In order to use gift splitting,both spouses must be U.S.citizens or residents at the time of the transfer.

Question 18

Donna transfers $200,000 of property to an irrevocable trust with a bank as trustee.Donna names Toby (age 60)to receive all of the trust income for the rest of his life.At Toby's death,the property is to pass to Al or Al's estate.What kind of interest do Toby and Al possess?

Accepted Answer

Toby has a present i

Question 19

The computation of the gift tax liability for a current year

Accepted Answer

A) is made without reference to previous years. 
B) requires the use of current-year tax rates only. 
C) requires the use of different rates,depending on when the gifts were made. 
D) requires knowledge of the total gift taxes paid in previous years. 
A) is made without reference to previous years. 
B) requires the use of current-year tax rates only. 
C) requires the use of different rates,depending on when the gifts were made. 
D) requires knowledge of the total gift taxes paid in previous years.

Question 20

Identify which of the following statements is false.

Accepted Answer

A) A future interest includes reversions,remainders,and other interests,which are limited to commence in use,possession,or enjoyment at some future date or time. 
B) The gift tax exclusion is available only for a gift of a present interest. 
C) A trust for a minor (Sec.2503(c)trust)must distribute all of its income currently in order to qualify for the annual exclusion. 
D) For a transfer made in trust,each beneficiary is deemed to be a separate donee. 
A) A future interest includes reversions,remainders,and other interests,which are limited to commence in use,possession,or enjoyment at some future date or time. 
B) The gift tax exclusion is available only for a gift of a present interest. 
C) A trust for a minor (Sec.2503(c)trust)must distribute all of its income currently in order to qualify for the annual exclusion. 
D) For a transfer made in trust,each beneficiary is deemed to be a separate donee.

Exam 12: The Gift Tax

Identify which of the following statements is false.

Identify which of the following statements is true.

Marilyn and Earl establish a trust benefiting their grandchild,Courtney,age 4.Courtney is to receive the accumulated income and corpus when she reaches age 30.In the year of the transfer,Courtney has a two-week period in which to request distributions.This trust is a

Bryce pays $10,000 for his adult grandson's tuition at medical school and $8,000 for the grandson's room and board in the medical school's dormitory.All payments are made directly to the medical school.Do these payments by Bryce qualify as gifts?

Identify which of the following statements is true.

A qualified disclaimer must be made within nine months after (a)the day the property is transferred,or (b)the day the person receiving the property becomes age 21,whichever is later.

Gift tax returns are filed on a calendar-year basis.

Discuss the negative aspects of gifts.

A net gift occurs when a donor makes a gift subject to the agreement that the recipient agrees to pay the gift tax.

Which of the following transfers is subject to the gift tax?

Tracy gave stock with an adjusted basis of $18,000 and an FMV of $15,000 to her nephew Phil.No gift tax was paid.Phil sold the stock for $16,000.The gain or loss Phil will recognize on the sale is

Which of the following statements is true?

Identify which of the following statements is false.

Discuss the statutory exemptions from the gift tax.

Identify which of the following statements is false.

Donna transfers $200,000 of property to an irrevocable trust with a bank as trustee.Donna names Toby (age 60)to receive all of the trust income for the rest of his life.At Toby's death,the property is to pass to Al or Al's estate.What kind of interest do Toby and Al possess?

The computation of the gift tax liability for a current year

Identify which of the following statements is false.

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